Radisson getting facelift, $1.5B infusion even as industry struggles with debt, revenue plunge

Radisson getting facelift, $1.5B US infusion

MIAMI — Radisson hotels are getting a $1.5 billion luxury rebranding and facelift in the U.S., owner Carlson Hotels Worldwide announced Wednesday, even as the industry struggles with crushing debt and plummeting revenue.

Radisson, forever underperforming in the U.S., will be remade into a more stylish and contemporary brand here, with distinctive architecture and flair, President and CEO Hubert Joly announced at a conference in Kissimmee, Fla.

And Carlson will increase its 1,000-hotel portfolio by more than 50 percent, including new luxury Regent hotels and mid-scale Country Inns & Suites and Park Inns.

It’s the first major commitment any large hotelier has made to expand since property values nose-dived during two years of declining business and leisure travel. By February, 15 percent of the 3,300 hotels and resorts tracked by data firm Trepp LLC are delinquent or in the foreclosure process, the highest total for any commercial sector since it began keeping data in 1998.

“This is an opportunity, and I think they’re kind of gutsy to do it, but it’s the right thing to do,” said Doug Shifflet, head of market research firm D.K. Shifflet & Associates in McLean, Va. “As everybody else is worried, if they step up and be competitive, they’re going to be better off.”

Joly said he intends to split the expansions equally among the brands — except Regent, which will remain small — and roughly one-third will be in the United States, one-third in India and one-third in other parts of Asia.

Joly said Carlson probably will build one or two hotels itself, while the others will be existing properties it renovates or rebrands. As hotel operators continue to unload underperforming properties to cope with the recession and a plunge in business travel, some of those may be properties that other companies are having trouble managing.

“We’re buying low, because this is the right time in the cycle, and … we’re going to hold the assets for the long term,” Joly said. “It’s true that there’s still a lot economic uncertainty for the short term. But come on, the world has been going through economic cycles forever, for the last two or three centuries. This is not Armageddon.”

Radisson has always been more successful outside the U.S., Joly said, because its properties in many of the world’s capitals are stunning, while its U.S. hotels are much more pedestrian. So Carlson is spending $700 million to open five “halo” properties — signature hotels intended to distinguish the brand — in still-undetermined major U.S. cities. They will be even more distinctive even the posh renovations — chic testaments, Joly says, to Radisson’s class and determination.

That’s actually what Shifflet thought Radisson needed all along.

“Radisson’s never been a major player largely because they’ve never stepped up and built the product in major cities,” he said.

Besides the contemporary design revisions to rooms and common areas, new amenities will include 3-hour express laundry, turndown service, upgraded bathrooms and free daily newspapers; all the brands already offer free Wi-Fi.

Most of the existing 159 Radissons in the U.S. are franchised, and the owners will pay for the renovations Carlson is promoting, at a cost of roughly $15,000 per room — more in large cities and at hotels with lots of common space. Those costs will total about $600 million, and Joly said the company may help some owners having trouble getting financing.

Carlson says 25 percent of its franchisees are already sold on the redesign and 50 percent are in serious negotiations.

Mark Woodworth, president of the firm PKF Hospitality Research, said Carlson’s timing was perfect.

“The good news with the Radisson brand (is) outside the U.S. they have some very high-quality, well-performing assets,” Woodworth said. “I think one of the challenges for them is to show they can do that here as well.”

Woodworth said Radisson may find franchisees in banks that have taken over foreclosed properties because lenders found in past downturns that they must operate a hotel for a year or two before the market recovers enough for them to be able to sell it.